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Developing Channel and LogisticsStrategySession 15

Course : J0844 - Entrepreneurial Marketing

Year : September 2011

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Channel Strategy

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How, when and where to make goods andservices available to customers.

Decisions must be based upon: Other elements of the marketing mix strategy.

A thorough understanding of the targetedsegment.

An understanding of the environment. The products characteristics and its stage in the

product life cycle.

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The Value Chain

A series of interrelated, value-addedfunctions plus the structure of organizationsperforming them.

On the inbound side: To obtain the inputsneeded for creating the goods and services.

On the outbound side: To meet demand bymaking the product or service available.

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Major Links in the Value Chain

During the planning process, marketers analyze how value is added at each connection in the value chain.

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Three Flows in the Value Chain

Channel and logistics involves managingthe three value-chain flows:

Products: Refers to physical items such

as raw materials and product packagingon the inbound side and finishedproducts on the outbound side.

Data: Refers to information such as thenumber of items ordered, customer

requirements and feedback, and otherinformation that adds value.

Money: Refers to payments for supplies,reseller or customer payments forfinished goods, and other money

movements between participants. 8-5

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Adding Value Through the

Chain Each participant adds value to satisfy the

needs of the next link.

The price paid by each successive participantreflects the value added by the previous link.

Customers at the end of the chain ultimatelypay for the combined value added by allparticipants.

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Services and the Value Chain

Marketers planning for service business facethe same supply chain challenges as thosewho manage tangible goods.

However, because services are generallyproduced and consumed simultaneously,marketers must plan flows to moreaccurately match supply and demand.

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Planning Channel Strategy

Each organization must make decisionsregarding:

Which channel functions must be covered bysomeone other than the organization?

Who will handle each function?

How many channel levels to use?, and

How many and what type of channelmembers to choose?

The answers to these questions will vary from product to

product and market to market.

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Types of Channel Functions

Matching volume, amount, or offer tocustomer needs.

Providing intermediaries and customers withproduct and market information.

Contacting and negotiating with customersto maintain relationships and complete sales.

Transporting and storing products prior topurchase.

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Decisions Regarding ChannelFunctions

The configuration of functions must be tailoredto products and markets.

Determine which functions are best handledby the firm and which are best handled by an

intermediary. Determine who the channel intermediary

should be.

Determine the compensation for the

intermediary. 8-10